The Flying Dinosaurs

Last week’s move by Delta Airlines to lower and simplify its fares might trigger an overdue shakeout of the nation’s airline industry, which last year posted losses in excess of $5 billion and is more than $25 billion in the hole for the decade. More of the nation’s major airlines should have become extinct by now -- joining such hallowed names as Eastern and Pan Am in the afterlife -- but companies have been allowed to keep flying by overly indulgent bankruptcy laws and clumsy government interference with the free market.

No industry has done a better job of gaming the bankruptcy system. For carriers like US Airways and United, bankruptcy seems less a safe harbor from creditors in which to reorganize than an ongoing part of their business plan. Flying under bankruptcy, as five airlines do, provides an unfair advantage over competitors, a license to continue losing money without facing the consequences. Worst of all, excessive reliance on this life support has stymied overall development of the industry and slowed growth of a new generation of healthy, low-cost airlines.

There is something about the airline business that turns members of Congress from both parties into hopeless socialists, unwilling to allow the market to allocate resources -- in this case the skies, planes and those airport gates -- to their most efficient use. Members of Congress care deeply about airlines, even beyond saving jobs in a given district, because they offer the means of escape from Washington, not to mention sizable frequent-flier awards.

The Bush administration deserves credit for resisting congressional pressure, including from House Speaker J. Dennis Hastert (R-Ill.), to grant airlines more aid on the bogus theory that their ongoing woes stem from the Sept. 11 attacks. But there is still far too much interference with the free market in the business, as exemplified by the government’s refusal in 2001 to allow a distress merger between United and US Airways. Worse, Congress has refused to lift antiquated limits on foreign ownership of U.S.-based carriers, which has needlessly shut out investment capital and competition.

Without Washington’s meddling, development of the multi-tiered industry that has so benefited consumers would accelerate. By multiple tiers, we mean a business in which not every airline strives to be all things to all people.

The older carriers’ business model and labor costs were predicated on the notion that you can be simultaneously Neiman Marcus and Wal-Mart. And they would charge Neiman Marcus fares for Wal-Mart service if you deigned to fly on short notice, or chose not to be stranded where you didn’t want to be over a Saturday night.

A multi-tiered industry would have fewer global and national carriers engaged in more meaningful competition, and more regional, lower-cost niche players. As the first of a new breed, Southwest Airlines -- an enterprise that has saved U.S. households untold billions -- succeeded against the odds, then beyond its expectations.

Southwest and newer successful low-cost carriers like JetBlue and AirTran now carry nearly a third of domestic passengers. Their strength is reinforced by the Internet, which robbed carriers of their pricing power and shifted it to consumers.

Delta’s move to cap last-minute fares and do away with Saturday-night-stay requirements is a recognition that it’s a new world out there for fliers, one that no one in Washington should oppose.